Not every professional athlete makes $250 million a year like New York Yankee 3rd baseman Alex Rodriguez. Some professional athletes, for instance major league ballplayers, make the league’s minimum salary, which for baseball in 2012 was $480 thousand. However, whether they earn $250 million or $480 thousand, every professional athlete is responsible for income tax - federal, state, foreign, or all. And since state income tax rates can vary from none to over 10%, it’s not surprising that professional athletes, who are free agents, have a huge tax advantage over tradable players as they can choose where they play and pay taxes.
Consider the recent mega baseball trade between the Toronto Blue Jays and the Miami Marlins. The Marlins traded Jose Reyes, Mark Buehrle, Josh Johnson, John Buck, and Emilio Bonifacio to Toronto for Yunel Escobar, Adeiny Hechavarria, Henderson Alvarez, and Jeff Mathis. The new Blue Jays, who had no state tax in Florida, will now pay Canadian tax in addition to U.S. federal income taxes. One good note for Reyes and Bonifacio, though. While some foreign countries also tax income derived from work done outside the country by their residents, the Dominican Republic, which is home for Reyes and Bonifacio, does not.
In addition to paying taxes, professional athletes must be concerned with their tax returns being audited. Because it is not uncommon for foreign athletes to dispute how much of their income is allocated to which taxing government, the Internal Revenue Service instituted a special program that targets foreign athletes. Successful professional athletes definitely need experienced and professional tax assistance.
Givner & Kaye focuses on sophisticated income tax planning and compliance, tax litigation and procedure, estate planning, and asset protection plans for individuals and businesses in Beverly Hills, Calabasas, West Los Angeles, Hollywood, and other areas of Los Angeles, Orange, Ventura, San Bernardino, Riverside and Santa Barbara Counties. Call Los Angeles Estate Planning and Asset Protection Plan Attorneys Givner & Kaye at (310) 207-8008 today.